Supreme Court Speaks in Two Different Intellectual Property Cases

At the end of June 2015, the Supreme Court of the United States (SCOTUS) published several opinions, including the highly-publicized decision that ruled all bans on same-sex marriage unconstitutional. While most of America was focused on the equal rights decision, there were two additional decisions regarding the use and protections of patents and copyrights that may be highly important to business owners and entrepreneurs.

Kimble v. Marvel Enterprises

Owners of patents may license their invention to others to use, to sell, to manufacture with, or to advertise for sale. In return for the license, the patent owner collects royalties. Some patent holders have long-lasting royalty agreements with companies that depend upon the technology to operate.

In 1964, the Supreme Court ruled in Brulotte v. Thys Co. that a patent holder should not be allowed to collect royalties after the patent had expired and that doing so would constitute unlawful misuse of a patent. This caused significant issues in existing royalty and licensing agreements that had to be renegotiated, as well as changed the way licensing agreements were set up in the future.

In the recent case of Kimble v. Marvel Enterprises, Stephen Kimble wanted to collect disputed royalty payments from Marvel for a Spider-man toy he patented in 1990. However, patents expire after 20 years, so both the district and appeals courts found that, under the Brulotte decision, Kimble was not entitled to any royalties since the patent expired in 2010. Kimble appealed, arguing that SCOTUS should overrule its previous decision and allow patent holders to continue to collect royalties after patent expiration. Ultimately, SCOTUS decided that the precedent from Brulotte would stand as Kimble did not present enough justification to overturn it. In particular, Kimble argued that the Court should use a “rule of reason” standard and analyze the anticompetitive effects of royalties following the expiration of a patent on a case-by-case basis. Kimble also argued that Brulotte stifled technological innovation. The Court disagreed on both accounts, holding that Kimble failed to provide evidence sufficient to overturn longstanding precedent.

Oracle America, Inc. v. Google, Inc.

The second intellectual property case appealed to the Supreme Court involved software licensing. In 2007, Google introduced the new software development kit for Android phones utilizing its own versions of Java applications programming interfaces (APIs). Google did not have a formal license from the maker of Java, Sun Microsystems, to use the Java technologies. When Oracle subsequently purchased Sun Microsystems in 2010, Google and Oracle were unable to reach an agreement after protracted negotiations. Oracle then filed suit for patent and copyright infringement. The issue under appeal was limited to whether Google infringed Oracle’s copyrights in 37 packages of source code contained in the Java API. At trial, the jury brought back a verdict of copyright infringement against Google with respect to the 37 packages, but also determined that Google did not infringe on Oracle’s copyright with respect to eight decompiled security files. The jury deadlocked on the issue of fair use.

The district court set aside the jury’s verdict and determined that the Java API’s were not copyrightable. The district court argued that Google had written its own code under the Java API and that an API method or function itself was not original enough to warrant copyright protection, holding specifically that the expression of the code, which is copyrightable, and the function of the code, which is not copyrightable, had merged.

The Ninth Circuit reversed the district court’s decision, ruling that a “structure, sequence and organization” of an API could be protected by a copyright. Because the code could have been written in multiple ways at the time of its creation, the code is original and unique. The Ninth Circuit’s analysis differentiated between the copyright in the APIs and the infringing uses. Google argued that the code was not unique and it copied the code only because there was no other way to write it. The Ninth Circuit determined that whether the code could have been written in multiple ways is determined from the position of the creator at the time of creation, not the infringer at the time of infringement. Oracle presented sufficient evidence that at its inception the creators of Java had multiple ways to write the code. Second, whether the infringement is defensible, namely because the expression and function of the code had merged, is an affirmative defense and a separate question from whether the code is copyrightable.

The Ninth Circuit reversed the District Court’s decision and remanded the case for determination of the fair use issue. Google appealed to the Supreme Court on the central issue of copyright.

SCOTUS denied certiorari and, therefore, the decision of the Ninth Circuit stands. This is a curious result, because the Ninth Circuit’s opinion explained in detail that the circuit courts are split in their analysis of copyright under 17 USC 102(a) and infringement under 17 USC 102(b). Why the Supreme Court did not take the opportunity to interpret the Copyright Act and put an end to the circuit-split is unclear. Denials of writs of certiorari rarely come with explanations. It is unclear where the denial of review upholds the Ninth Circuit analysis, which clearly spelled out how the courts in the Ninth Circuit will analyze copyright and infringement, or leaves it for the circuit courts to figure out. In short, had this case been held in another circuit court it could have easily resulted in a different opinion, leaving makers of computer code with unclear results depending in which circuit the code is created.

The case will now return to the District Court for a determination of Google’s “fair use” defense. We are sure to see this case again as neither side appears ready to back down.

This is an important decision for any companies or individuals who are in the business of developing software or using third-party development tools embedded in proprietary programs. Prior to development, you should discuss any possible copyright, infringement and licensing issues with an experienced intellectual property attorney. At the Structure Law Group, our skilled IP attorneys regularly assist business these and other types of intellectual property matters. If you need any type of legal assistance with your business, call today at 408-441-7500 for help.